13) (14 pts) Given the following information about financed with debt, preferred

Question

13) (14 pts) Given the following information about financed with debt, preferred stock and common stock. The tax rate for Company is Debt: 5,000 Bonds outstanding with a 5% coupon, $1,000 par value, 18 yeas to maturity selling for $960; the bonds make semiannual coupon payments stock: 170,000 shares outstanding, seling for $80.S per share; The compan's common stock has a beta of 1.2. The risk-free rate is 1.7% and the market risk premium 675%. Preferred stock: 45,000 shares of 5.75 percent preferred stock outstanding, currently seling for 534 per share a) What is the market value of the assets for company 2? 35 oarket Value of Asets b) What percentage of the assets is financed with debt? %Debt- c) What percentage of the assets is financed with common stock? % Common Stock d) What percentage of the assets is financed with preferred stock? us,000 u = nns.co 4585o o % Preferred Stock - e) What is the before tax cost of debt? f) What is the cost of preferred stock? g) What is the cost of common stock (Equity) h) What is the WACC for Company Z Before tax cost of debt Cost of Preferred Stock- Cost of Common Stock % % WACC

Explanation / Answer

h)

e) 5% f) 5.75% g) Cost of Common stock =Risk free rate + Market Risk premium * Beta Cost of Common stock =1.7% + 7.5% *1.2 10.70%

Related Questions

Navigate

• Browse (All)
• Browse 1
• Subjects

---

---

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.